Alberta case affirms powers of condo board
A February 2009 decision of the Alberta Court of Queen’s Bench should be added to the list of notable condo cases for 2009. Check out Dykun v. Cravenbrook Condominium Corporation No. 032 1893.
After changing managers on December 1, 2007, the condominium’s board discovered that the previous manager had improperly withdrawn money from the reserve fund to pay operating expenses, leaving the corporation on the brink of insolvency.
Two months later, the board announced that it was levying a special assessment to raise the money necessary for the corporation to continue operating and to replenish the reserve fund.
One unit owner fought tooth and nail to resist paying his $800 share of the $80,000 special assessment. He brought an application against the board and argued that the corporation should have exhausted alternative options before it levied the special assessment. The owner presented one alternative strategy and asked the court to set aside the board’s decision and to implement his suggested strategy.
In dismissing the application, the court found that the board had acted prudently and responsibly in asking and following the advice of the corporation’s solicitors and auditors to levy the special assessment. The court did not agree with this unit owner’s proposed strategy and went on to say:
Even assuming that Mr. Dykun’s solution was an appropriate one, he cannot force his views on the Board of Directors. Management of the affairs of Cravenbrook rests with the board and not with any single unit owner. The Board has been properly elected to oversee Cravenbrook’s affairs. Mr. Dykun has not. Mr. Dykun cannot dictate to the board the course of action that they should be following. If he is interested in having a greater say in how the overall affairs of Cravenbrook should be managed, he should seek election to the board of directors.
This approach seems like a good answer to cases where owners look to second-guess decisions of the elected board. The decision in this case further affirms the concept that the board has the final say in managing the corporation’s business, whether in budgetary matters or in selecting the colour scheme for the corridor refurbishment project.
What do you think?
The judge was quite correct. The more serious problem asks the question, "why did the Board not pay more attention to what was happening with the owners' money?" My own condo board (and I am a member of it) fails to recognize the proper use of Reserve Funds and has diverted sums (not large ones, thank heaven) from the fund for such items as the replacement of four tiles on the deck of the swimming pool and a proposed redecoration of the basement lobby. The latter is certainly not "major replacement or repair" of a common element as mandated by the Ontario Condo Act.
Reserve Funds are not slush funds and boards should use funds that are available or budget accordingly.
The outcome of this case should not be surprising to anyone, should it? While the report is lacking precisely HOW this Board got into this problem in the firt place (where were they with respect to scrutiny of the Manager?) when they 'discovered' that they had a funds problem they did, at least, seek professional advice AND ACTED ON THAT ADVICE.....the additional cost aside. But, of course there is always a 'but'....there are Boards out there that seek professional advice and fail/refuse to follow it.....go figure!
How does one get to those people?
I am a member of this condo assoc. and the the previous management company - Helm Management - was less than cooperative with providing the financial statements to the condo board of directors. The board did not have total disclosure of how the funds were being improperly allocated. What was happening was that Helm was using the reserve fund to cover operating costs, and thereby depleting the reserve funds below acceptable levels.
This situation was caused (IMO) by the original builder setting the condo. fees too low and making it nearly impossible to maintain the property with such a low level of operating income. The builder did this to attract initial buyers of course, and continues to work with Helm in ongoing projects - they have a new condo assoc. in Ft. Saskatchewan in the building phase right now. (July 2010)
The other problem was that the builder (Rohit) filed one set of condo rules with the Strathcona County office and gave a separate slightly different set of rules to the home owners. This caused a great deal of confusion to the owners regarding the actual legal status of their properties. (It is still a bit confusing to be honest.)
There should be some sort of overseeing body that actually enforces the legalaties that are in place, rather than just set the rules and sit back and leave the onus on the homeowner to force (through private legal action that they would have to pay for) the builders and management companies to adhere to the rules that are in place.
As a home owner in the Cravenbrook cono assoc. I have had to pay my own special assessment fee of over $1000.00 and had my condo fees increase approx. 50% within 1 year of buying one of the units from the original owner.
It seems the builders have a much greater amount of leeway to operate freely then they should...